Validity of Arbitration Agreement and Decisions of Judges

October 26, 2006
Validity of Arbitration Agreement and Decisions of Judges

The Mexican Supreme Court of Justice holds that local judges, and not arbitral panels, will determine the validity ofarbitration agreements. In a recent decision, the Mexican Supreme Court of Justice held that while it is possible to opt out theinvolvement of state courts in a legal conflict, in order to allow such conflict to be submitted to commercial arbitration, thereis an exception when a court exercising jurisdiction over an action alleging nullity of the arbitral compromise declares sucharbitration compromise null, ineffective or unenforceable. The reasoning of the Supreme Court is that, on one hand, one mustnot set aside the existence of proper judicial control over arbitration and, on the other hand, the authority of arbitrators stemsfrom the will of the parties to act autonomously, so that if a lack of consent on the part of the parties to submit to arbitrationexists, the nullity action shall be resolved previously by a court of competent jurisdiction. The decision is relevant as theSupreme Court leaves open the possibility that the parties, even though they have agreed to an “Arbitration Clause” mayappear before a judge in order to resolve in advance the validity, efficacy or enforcement of said clause or compromise. Withthis decision, notwithstanding the fact that the parties may initiate and resolve conflicts through arbitration proceedings, saidarbitration resolution may be superseded by a ruling issued by a presiding judge nullifying the arbitration clause in case any ofthe parties presents such a petition. See decision XXV/2006 Commercial Arbitration. Competency to hear nullity actionsregarding arbitration agreements as set forth in the first paragraph of Article 1424 of the Commerce Code, corresponding tothe judge and not to an arbitration panel.

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